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Gross profit for retailers is the total revenue from sales minus the cost of goods sold. It reflects the core profitability of the products being sold before accounting for other operating expenses.
Gross profit for retailers is the total revenue from sales minus the cost of goods sold (COGS). It reflects the core profitability of the products being sold before accounting for other operating expenses.
To calculate gross profit, use the following formula:
Gross Profit = Sales Revenue - Cost of Goods Sold (COGS)
For retailers, gross profit is a fundamental indicator of their business health because it shows how efficiently they are managing their core operations. It is important because:
- It indicates the markup on merchandise and how well the retailer controls direct product costs.
- It helps in determining the resources available to cover other operating expenses.
- It provides insights into pricing strategies and inventory management.
- It is a key factor in financial analysis for making strategic business decisions.